Is Sustainable Development Out of Reach?

This blog post is to illustrate the ongoing challenge of reducing carbon economies in the developing world.

I was momentarily dumbstruck last week during a two-day internal work conference.  We were discussing the most current thinking in economic development.  The presenter was Ricardo Hausmann,  an economics professor and director of the Center for International Development at the Harvard Kennedy School.  Previously he was the Venezuelan Minister of Planning and the Chief Economist at the Inter-American Development Bank.  I was ready to learn from the man that has developed the underpinning of our whole model.  His lectures were fascinating but something was missing…something huge.

Before we get to that, let’s recap Dr. Hausmann’s hypothesis of international development.  Basically, development occurs through improvements in technology.  Technology is three parts: (1) Tools (2) Manuals/Codes/Standards known as codified knowledge and the last (3) is Know-how or tacit knowledge.  That’s the ability to perform a task that doesn’t require understanding, much like how you know how to walk but couldn’t teach another by writing instructions.  Its this third component, know-how, that is so hard to come by in emerging markets and we call that a binding constraint to growth.  Collective know-how or the know-how to run systems, which is much more effective, is even harder to develop and there are some reasons for that.

First, developed societies specialize. Each individual is a small cog in a larger system.  On the other hand in less developed countries people are large, redundant cogs and have many of the same skills – building shelters, growing crops, hunting and gathering, keeping order, etc.  This lack of specialization hinders the development and maturation of systems.  If you want to increase know-how you have to increase the diversity of production in that society.

So following that, the road to a country’s development is a function of two variables.  These are the complexity of what they can produce (e.g. a bale of wheat vs. a motor), based on know-how, and the connectedness between industries in that country. If industries are closely tied, then know-how can easily jump and increase development. Below are two product space maps.  They illustrate the connectedness of industries in Peru vs South Korea. You can see that Korea has many more products they produce and those networks of products are closely knitted.


Note: The Product Space methodology provides a map of all traded goods displaying relative proximity or similarity between products. The colors on the map represent the Leamer classification which categorizes products according to labor, capital and other resource intensiveness. The black squares indicate products in which the country has a revealed comparative advantage. (https://vox.lacea.org/?q=income_Asia_LA)


The issue is that developing counties do not have collective know-how and/or the industries to allow this knowledge to jump.  In this case, everyone is stuck where they are.  That means the goal of development is to import know-how, build local capacity, increase connectedness and help a country move through a common track (typically, agriculture to garments to electronics then machinery and finally chemicals).

Wait!! This is the latest thinking!?  If we are going to promote models to increase this pathway, we are pushing for an exponential increase in carbon emissions. Sustainable development has been in the conversation since the 1987 Bruntland Report but noticeably absent at this conference.

Why is that? We know both economic development and climate change are wicked problems…is this confluence of the two (i.e. sustainable development)…too great to overcome?  Is sustainable development the domain of optimists and the serious professionals work on what works…?

The challenge could just be too great. The University of Cape Town’s African Climate and Development Initiative illustrates this reality.  Their Mitigation and Action Plan Scenarios (MAPS) Project is a multi-year study of a developing country’s economy and then models what actions need to be taken to reduce carbon levels below the 2C and 1.5C contribution.  It’s not pretty. Even in the most austere schemes it is unreasonable for any country studied to get under 2 degrees.  In addition, developing countries cry foul when asked to restrain themselves while the developed countries never did the same.

Yet in Sonja Klinsky’s Paper, “Social-psychology, Equity and Climate Change Negotiations”, she argues that it isn’t so polarized between the north and south.  The concepts of fairness are flexible. She states,” Progress can be made when parties, despite different views, perceive each other as being members of the same moral community.” She concludes that the levers of change must be built on trust and arguments of equity customized between mitigation, adaptation and loss.

So what to do?  Economic development is accomplished through carbon intensive industries. Developing countries now cannot adequately make their growth sustainable, and if they could there is an unfairness that they carry the carbon reduction burden when their for-bearers didn’t.  Perhaps the answer is back to the know-how.  Dr. Hausmann promotes importing know-how, but I only heard the business-as-usual kind.  Its time to flip that and focus policy on importing the sustainable know-how emerging in recently developed economies (see Taiwan) and make an argument for that as the binding constraint to sustainable development.

3 thoughts on “Is Sustainable Development Out of Reach?

  1. Really interesting read. Agree with you on the issue of this being, not a zero-sum game. If we keep looking at the total emissions and continue the North vs South winner takes it all – discourse, there surely will be no headway. Sanity hopefully will prevail. We have to admit that the model of pegging progress to increase in GDP is broken. Happiness and life satisfaction surely are not tied to increase in nations GDPs.

    Learning lessons from the Global North on what not to do – starting from avoiding unsustainable production and consumption models, the developing countries should surely rejig their development models and trajectories if we want to collectively win this race to save our planet. Developing countries can adopt better public transport systems (and reduce transport-related emissions), use the smart city initiatives to model their cities to decrease carbon emissions, protect their natural resources including the rivers which are hugely polluted and reduce methane emissions from livestock, wood burning and agriculture, increase afforestation and make faster inroads to a transition to non-fossil fuel (renewable) energy sources.

    We need to be mindful though that the poor are always more vulnerable to the floods, cyclones and other natural calamities compared to the well-off- look at the current example of Mozambique which has been battered by Cyclone Kenneth even as the government and aid agencies were reeling with the task of supporting people affected by the previous cyclone – Cyclone Idai. Two massive cyclones (and the rains and floods and landslides) in one season bode ill for a developing country whose resources are stretched. Let’s not forget the recurring droughts and massive desertification – in large parts of the world, which is impacting agriculture, livelihoods and even causing widespread migration and conflict (https://www.unccd.int/news-events/tackling-desertification-critical-our-security-warn-un-leaders-africa-environment-day)

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  2. Great topic. It is indeed truth that the wealth of the now industrialised nations was to a large extent built on carbon intensive production. It is also truth that some emerging markets – not surprisingly are following the same path. This is the result of many intertwined factors. Firstly, that it is a “proven model” to follow. Secondly, there seems to be a pattern. The World (mainly the developed countries) need a certain amount of labour intensive goods. These are produced by developing countries with lower labour cost. As the country develops and wages rise the production moves to another countries (e.g. from China to Vietnam). As outlined by Kate Raworth, finding a different pathway for the now developing markets is the 21st century biggest challenge and as the related study from University of Leeds (https://goodlife.leeds.ac.uk/) suggest, no country have found the formula yet. Technology, is often highlighted as the silver bullet. I too have some reservations about that and Hausman’s model would seem to confirm this concern. Yet there are signs that the fourth revolution may give rise to some optimism. First, if the grid that produces the energy used for the production is dominated by renewable energy (as a result of lower levelized cost) then the embedded emission will be lower. This however, will not resolve the other critically challenged planetary boundaries (e.g. water, land use and biodiversity) that production of consumables contributes to. Although it is a bit of cliché to mention China, I would suggest that its ability to be a serious player in IT (AI etc) suggests that some leapfrogging that can happen. Of course China has power that few other countries have and hence not all developing countries can replicate this model. However, it does seem to me that some level of specialisation in an area of the digital economy may lift some countries (mainly in Asia) out of poverty. This leaves Africa that remain troubled by so many social and environmental problems and with (what seems) insufficient global political importance (sadly) to attract partners to help it leapfrog. Hence the need for “aid”. On one hand the explosive expected growth in population should elevate its relevance but at the same time its problems. I do believe that some level of “just transition” needs to be in place to allow Africa to “learn how to fish” (bring in real know how not the usual drop and use) rather than offering a “fish” (aid).

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  3. Hi,
    I read with much interest your post, and I was gobsmacked too that the “last thinking” presented to the audience was actually missing the sustainability angle! I honestly thought that the idea that carbon emission reduction is a threat to developed countries economic growth was buried a few years ago. A quick web search pointed to three recent studies that prove the case for decoupling carbon emissions and growth. The first is a report released in 2016 and entitled “The Final Frontier – Decarbonising Europe’s energy-intensive industries” found that energy-intensive industry can cut emissions by 80% without losing competitiveness. Second, two studies conducted by WRI and Carbon Brief in the same year to answer the exact question: “Is it possible to reduce emissions while growing the economy?” showed that, between 2000 and 2014, all major economies were able to cut carbon emissions while growing their GDP. The data are pretty impressive. The study by Carbon Brief shows that Ukraine cut carbon emission by 31.6 per cent for a total of 101.4 million tonnes while increasing the GDP by 49.5 per cent. The reduction in CO2 intensity was 54 per cent!
    The UK cut its emissions by 128 million tonnes of CO2, a 24 per cent reduction. At the same time, its real UK GDP grew by 27 per cent, and as a result, its carbon intensity dropped by 40 per cent. This was the most significant improvement among major economies that decoupled their emissions from growth, between 2000 and 2014. When looking at consumption-based CO2 emissions, the picture is less favourable as 21 countries did decouple emissions from growth – some countries were only able to decouple by “offshoring” some of their emissions to other countries – but still, all the major developed economies made it to the list.
    Now to the biggest developing economies! A study conducted in 2016 and co-authored by Valerie Karplus, an MIT professor, showed that “Using carbon pricing in combination with energy price reforms and renewable energy support, China could reach significant levels of emissions reduction without undermining economic growth”. Among other things, China committed to a goal of making nonfossil fuel sources account for 20 per cent of its energy use by 2030; in 2015, that figure stood at 11 per cent. According to a recent report by pwc – 2018 data – ‘China has retained its leading position among the G20 with a decarbonisation rate of 5.2%. This takes it to a 41% reduction in carbon intensity over the past ten years and demonstrates the potential for economies to drive year-on-year progress. GDP growth in China was driven primarily by growth in services, high-tech and equipment manufacturing as well as technological upgrading, while investment in energy-intensive industries fell, thereby making growth greener.” There are obviously challenges – coal demand increased in countries such as Turkey (12.7%), Indonesia (7.4%) and India (5%) – but data show clearly that ALL countries have the ability to decouple carbon emissions from economic growth. Some will find it very challenging as they have not the means that China has, but the Paris Agreement accounted for this and developed economies agreed on supporting financially the sustainable development i.e. decarbonization of developing countries (nothing was a binding commitment but numbers were put on paper!). Now the above seems to suggest that decoupling carbon emission from growth is easy. Obviously, it is not. According to the mentioned pwc report in 2018, not one of the G20 countries achieved the 6.4% reduction rate that is required to limit global warming to two degrees. That’s a concern but we must remember that the objective is possible and it is a matter of having the right political will and policies in place. Last point regarding Dr Hausmann’s hypothesis of international development and know-how. It would have been good to see a relationship between economic development and clean tech. That would have added an interesting perspective I think!

    References:
    https://www.carbonbrief.org/the-35-countries-cutting-the-link-between-economic-growth-and-emissions

    https://carbonmarketwatch.org/2016/05/25/press-statement-new-report-finds-energy-intensive-industry-can-cut-emissions-by-80-without-compromising-competitiveness/

    http://news.mit.edu/2016/china-policies-lower-emissions-faster-without-preventing-economic-growth-0209

    https://www.pwc.co.uk/services/sustainability-climate-change/insights/low-carbon-economy-index.html

    http://www.globalcarbonatlas.org/en/CO2-emissions

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